IBM and Red Hat: Inspired or desperate? And a difficult journey ahead

IBM’s proposed $34 billion purchase of Red Hat looks like a good idea for both sides. But is the proposed coming together borne of inspiration, or desperation?

In other words, were the two companies a bit like the last ones to find a partner at the dance? The dance in this case is cloud, and more specifically hybrid and multi-cloud.

IBM, once had an identity as the mainframe seller you could never get fired for choosing.

Nowadays, big, on-prem compute and storage hardware and the software and services that surround them are still core to its portfolio, but are joined by a push to the cloud (and a mix of software offerings: Analytics, AI etc).

It is the fourth largest cloud player, but a very long way behind the big three in terms of market share: AWS, Microsoft Azure and Google Cloud Platform.

IBM Softlayer offers cloud compute with file, object and block storage with forays into containers, AI, blockchain and analytics.

Meanwhile, Red Hat has made its living since formation in 1993 as a purveyor of commercial distributions of open source software.

Its offerings centre on its Red Hat Enterprise Linux operating system, the OpenStack private cloud environment, OpenShift container management, and the JBoss and Ansible application platforms.

Pressure on IBM and Red Hat to seek what the other has comes from the rise of the cloud and especially the big three.

AWS, Azure and Google are increasingly able to provide mature compute and storage services for enterprise customers with pushes made towards analytics, IoT, containers etc.

This threatens IBM, not least in its own cloud business Softlayer, but more widely too as IT increasingly moves to hybrid and multi-cloud models. IBM’s revenues have been in decline for about five years until this year.

And there are threats too to Red Hat, which can see the cloud big three increasingly able to provide what it does but at less cost and with the convenience of the cloud.

So, it’s very easy to see a symmetry in the union of these two.

A well-integrated Red Hat could provide the cloud-era IP that IBM needs to keep up, allowing it to move more gracefully towards hybrid and multi-cloud offerings across its portfolio.

It could also help IBM upgrade its internal culture to a younger, more sparky one, with Red Hat far more attractive to developers.

But it’s also possible to see deep uneasiness as they come together.

IBM has stated that Red Hat will keep its independence, which includes partnerships with the main cloud providers. But will the freedom Red Hat gives to its developers survive?

The real measure of success will be IBM’s rankings against the big cloud providers and in its ongoing revenues. Superficially, what Red Hat has in terms of products can help this.

IBM is, however, likely to want to restrict development efforts along commercial channels. How it does that, without killing the creative heart of Red Hat, is key.